Why Blockbuster Should Go After Qwikster, Not Netflix

Joe Clayton, CEO of Dish Network, the company that recently acquired Blockbuster, has had a good couple of months—without really doing too much to bolster the Blockbuster brand. Instead, he's just kicked back, microwaved a bowl of popcorn, and watched as Netflix has assumed the role of evil movie villain.

The tragedy begins back in July, when Netflix announced a 60% price hike for one of its subscription plans. Customers almost immediately swamped the company's blog with more than 12,000 comments. But reaction to Netflix's revelation yesterday that it would be splitting up its streaming and DVD business (the latter launching as Qwikster.com) has been twice as bad: more than 24,000 responses currently clog Netflix's comment section.

The general feeling? Negative bordering on hateful. All of the top comments, based on the number of Facebook "Likes," drip with vitriol. One commenter referred to Netflix's decision as corporate suicide; another called it an "epic fail" and promised to cancel; and still another said, "I loved you, Netflix, but I feel like the wife who wakes up seven years later and wonders what happened to the man she married." (I could not find a positive comment with triple-digit Facebook "Likes.") On Twitter, the sentiment has been even worse. Social analytics firm Crimson Hexagon, which helped us scan tweets over the past 24 hours, found that of the 86,997 opinions it analyzed, roughly 43% were negative, with 10% saying CEO Reed Hastings's letter was too little too late; 19% saying they disliked the "Qwikster" name; and 14% signaling they are against the services being split. Another 28% simply passed along the news via Twitter (which we'll assume represents neutral opinion). Just 12% agreed with Netflix's decision.

Netflix says it's all part of a larger plan, and that its main issue has been poor communication with consumers. Some, such as venture capitalist Mark Suster, have applauded Netflix's bold moves. But it's safe to assume that the average Netflix subscriber is either incredibly pissed or incredibly confused—in fact, last week, the company adjusted its guidance, citing worse-than-expect subscriber declines of roughly a million customers.

Can Blockbuster capitalize on the negative sentiment?

It's clear that's already Dish Network's plan. On Blockbuster.com, a pop-up screen greets every customer with news that Netflix has jacked up prices by 60%, while the homepage warns that Netflix does not offer certain amenities such as in-store exchanges.

In the past, it's made sense to stick with Netflix over Blockbuster. No service—not Amazon, Hulu, or Redbox—offered what Netflix offered. It was a value package: subscribers were getting the one-two punch of streaming and DVDs by mail. But now those services have been divorced, and soon customers will have to deal with separate websites, separate queues, separate rating and review systems, and separate bills on their credit card statements. So while there might not yet be a "Netflix killer," that doesn't mean there won't be a "Qwikster killer."

In other words, we no longer have to compare Netflix to Blockbuster. We're comparing Qwikster to Blockbuster. And Blockbuster's DVD-by-mail competitor now has undeniable advantages over Qwikster. First, Blockbuster offers unlimited in-store exchanges, meaning when you're done watching a flick, you can simply drive to the Blockbuster store to grab a new one. Second, Blockbuster has access to new releases—you'll have to wait a whole 28 days before you can gain access to them on Qwikster. Lastly, Blockbuster offers Blu-ray films for no additional cost.

Yes, Blockbuster is more expensive. It costs $9.99 per month for a 1 disc at-a-time plan, whereas Qwikster costs just $7.99 per month. However, the small price increase is certainly worth the upgrade of new releases and in-store exchanges (if a store is located nearby). I wouldn't have said this before—and Blockbuster's plans haven't even changed. Netflix's plans have. And with Qwikster, the supplementary and convenient benefits of having an integrated website and offering, as well as access to streaming and mobile content, are rendered irrelevant.

Netflix still offers the best streaming service on the market—and it just got even better with the news of a new two-year deal that expands streaming options of shows from Discovery, TLC, and Animal Planet. But some customers might choose a subscription to Netflix and Blockbuster rather than Netflix and Qwikster. (Perhaps recognizing this possibility, Netflix will soon offer video games, which Blockbuster customers already had access to by mail.)

And perhaps Blockbuster will soon offer a reason to switch fully over from Netflix (and Qwikster), as Dish Network plans to hold an event this week with a surprise announcement. The name of that event?